The 4 Levels of Salary Negotiation Counter Offers

Published 6:00 pm, Sunday, January 26, 2014

Don't Negotiate Randomly, Know Which Counter Offer is Best

By Jim Hopkinson, Salary.com contributing writer.

In the world of salary negotiation, there’s an important word that comes up quite often: Leverage. By definition, it means using a situation or advantage to obtain a desired result, in our case, negotiating a higher salary.

When you’re looking to gain leverage, it often comes as a result of having other options.

Someone who already has a steady income in a job has more options than someone who has been out of work for 6 months with bills piling up

If you have in-demand skills, such as a mobile software development, you’re going to have more options than the average job seeker

Lastly, when you’re offered a salary at one job, having a counter-offer on the table from another company gives you multiple options

But how far should you go to put yourself in this position? I recently had someone we’ll call “Mike” present this scenario:

“I’m interviewing for a position and the offer will probably be in the $80,000 range. At the same time, one of my friends interviewed at another company and he ended up passing on their offer of $100,000, mainly because he had serious concerns about the leadership and direction of the company. A week later that same company contacted me via LinkedIn to see if I was interested in the role. Knowing I probably don't want to work there, and that my friend had to meet with 4 different people for more than 5 hours, should I go on the interview anyway so that I have that higher offer on the table that I can use for a counter-offer?”

What do you think this person should do? Before we decide, I’d present my levels of counter-offers.

Level 1 (Bronze) Level one has the least amount of leverage, and is basically flat-out lying. When a company presents their offer for $80,000, you simply choose a bigger number at random and reply, “That sounds a bit low to me. I think I can get $100,000 at another company.” Needless to say, trying to bluff your way through a negotiation is the least effective method on a number of levels.

Level 2 (Silver) The Silver level of negotiation is presenting a counter-offer based on research. This is something that every job-seeker should be doing anyway, checking the Salary.com database to find out what their skills are worth in the marketplace.

Your response to their offer would be something like, “I'm really interested in this job and appreciate your generous offer. However, I’ve done some extensive research online and throughout my network, and what I’ve found is that for someone with my skills, the compensation is closer to the $100,000 range.”

This approach shows that you have done your market research and aren’t just picking numbers out of a hat. Many times this is enough, but we can do better.

Let’s say you’ve been doing your research and are still finding that there is quite a range -- in this case, $75,000 - $125,000. As a hypothetical example, pretend the position is for a Senior Marketing Manager for Pepsi. Now let’s say that at the last industry event you attended, you became good friends with someone on the marketing team at Coke. You've stayed in touch and are comfortable enough to send them an email, tell them about the position that you are applying for, and get their opinion.

They might be able to tell you, “Actually, we just hired a Senior Marketing Manager a few months ago, and they offered them $105,000.” Or they might say, “We don’t have a position like that open now, but knowing you personally, the experience you have in the industry, and the skills that you could bring to a team like ours, I’d say if we were to hire you, the salary would be around $100,000.”

Thus, your response to the job offer would be something like, “I'm really interested in this job and appreciate your generous offer. However, I’ve done some extensive research online and throughout my network, and know that the starting salary for a Senior Marketing Manager at a very similar company offers in the low six-figures for someone with my skills.”

In this case you haven’t actually gone on an interview or received a competing offer, but you’ve done more than most other candidates would have done in terms of industry-specific research.

Level 4 (Platinum) The highest level of leverage occurs when you have one or more legitimate offers from other companies at the same time, at companies that you want to work for. This can happen to college seniors when companies are recruiting on campus at the same time, resulting in the best candidates being offered multiple positions.

As your career progresses, it becomes less likely that the timing works out perfectly and multiple offers roll in on the same day. The typical job search takes months and different companies progress at different speeds. Thus, a more likely scenario might actually be stressful, with a job seeker receiving a very good offer from Company A and needing to respond quickly, while still only in the second round of interviews for Company B. Thus, they are faced with accepting or rejecting a sure thing, not knowing if they will even get the job at their second option.

However, if the stars do align and you receive two official offers at the same time, it’s possible to tactfully use this information to your advantage. Of course, you should always look beyond salary when making a career decision. There are many factors – the type of work you’re doing, your title, the commute, vacation, how you get along with your manager – that should be considered in the big picture.

So where does that leave our friend Mike in the opening scenario?

On one hand, some would argue that it’s never a bad thing to go on an interview, under the heading, “You never know.” Just because Mike’s friend had a bad experience during the interview and may doubt the strength of the company, it doesn’t mean Mike’s experience will be the same. Perhaps he totally clicks with the hiring manager, they talk about skills that differentiate what Mike does vs. his friend, and they offer him a job in another, fast-growing department. Perhaps Mike digs deeper and asks questions concerning management and the future of the company, and gets a fuller explanation. Worst case, he has that Platinum-level counter-offer.

On the other hand, it seemed to me that Mike had already decided that he had zero interest in working for the company. In that case, it would be difficult to recommend that he knowingly waste 5+ hours of everyone’s time going through an interview charade.

When he enters negotiation with his original company, he could use a gold-level response. In fact, he can tailor it and actually use the fact that he hasn’t gone on the competing interview yet to his advantage: "I'm really interested in this job and appreciate your generous offer. However, a competing company has contacted me for an interview, and I know that the salary for the position is in the $100,000 range. After meeting with everyone today, I really think this job is a great fit, so I’d love to discuss how we might get closer to that number.”

Yes, having an official offer would hold a little more credence, but it’s a subtle difference and he is genuinely telling the truth. To the hiring company, this could serve as a motivator to raise their initial offer and get the deal done, to prevent him from going on that other interview. If they can meet him halfway at $90,000, add an extra week of vacation, and he truly does want the position, then it’s a win for both sides.

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